Quarterly report pursuant to Section 13 or 15(d)

Convertible Notes Payable

v3.19.3
Convertible Notes Payable
9 Months Ended
Sep. 30, 2019
Debt Disclosure [Abstract]  
Convertible Notes Payable Convertible Notes PayableOn February 19, 2019, the Company consummated its IPO. In connection with the closing of the IPO, the Company's convertible notes (and related accrued interest) of $11,784,987 were converted into 6,825,391 shares of the Company's common stock. Upon the closing of the IPO, certain notes were to be automatically converted according to their terms into the Company’s common stock to the extent and provided that certain holders of these notes are not permitted to convert such notes to the extent that the holders or any of its affiliates would beneficially own in excess of 4.99% of the Company’s common stock
after such conversion. Due to this 4.99% limitation, principal representing $47,781 of these notes remained outstanding and were converted into 273,034 shares of its common stock in August and September 2019 when the conversion did not result in the holders and any of its affiliates owning more than 4.99% of the Company's outstanding common shares.
The total amount of issuances under the Company's First Note and First Amendment throughout 2017 amounted to $5,000,000 and were issued to a single related party, who is a major stockholder of the Company. As a result of the Company’s IPO on February 19, 2019, the principal amount of $5,000,000 and accrued interest of $944,063 were converted into 1,585,086 shares of the Company’s common stock.
On November 1, 2017, the Board approved a second note purchase agreement (the "Second Note") allowing the Company to sell an aggregate of $1,900,000 of Notes. The Notes were convertible into either the Company’s preferred or common stock (depends on the equity securities offered in the equity financing) at 75% of the price paid per share in a subsequent equity financing where the Company receives gross proceeds of not less than $5,000,000 or at 85% of the per share price determined by dividing the equity value of the Company that is expected to be available for distribution to the Company’s stockholders by the aggregate number of the Company’s fully-diluted common shares upon the closing of a sale, liquidation, merger, or change of control of the Company. The Notes bore interest at 8.25% per annum and initially matured on June 29, 2018, which date was extended as discussed below. At maturity, the interest rate increased to 12.0% per annum.
The Company closed the initial tranche of the Second Note on November 9, 2017 for $400,000, followed by a tranche on December 1, 2017, for $375,000, a third tranche on December 26, 2017 for $250,000, a fourth tranche on January 8, 2018 for $250,000, a fifth tranche on January 25, 2018 for $250,000 and a final tranche on February 13, 2018 for $375,000 for a total of $1,900,000.
On June 29, 2018, the Company and the related party modified the maturity date of the Notes entered into under the First Note and Second Note to April 30, 2019.
The total amount of issuance under the Second Note amounted to $1,900,000 and were issued to a single related party, who is a major stockholder of the Company. As a result of the Company’s IPO, the principal amount of $1,900,000 and accrued interest of $223,368 were converted into 566,235 shares of the Company’s common stock.
On April 2, 2018, the Board approved a note purchase agreement (the "Third Note"), which was amended on August 10, 2018, allowing the Company to sell an aggregate of $500,000 of Notes. The Third Note provided that, on the closing date of the IPO, the outstanding principal and accrued, but unpaid, interest would be converted into common stock at the conversion price of $0.175. However, certain notes holders were not permitted to convert their notes when the holders or any of its affiliates would beneficially owned in excess of 4.99% of the Company’s common stock after such conversion. The holders of the Company’s outstanding preferred shares agreed to waive the adjustment to the preferred stock conversion price triggered by the Third Note. The Notes bore interest at 10.0% per annum and were to mature on April 2, 2020 but were settled as a result of the Company's IPO on February 19, 2019.
The total amount of issuance under the Third Note amounted to $500,000. The Company issued $250,000 to a single related party, who is a major stockholder of the Company, and $250,000 to four non-related party investors. As a result of the Company’s IPO, principal amount of $452,219 and accrued interest of $43,562 were converted into 2,833,034 shares of the Company’s common stock. In August and September 2019, the remaining principal amount of $47,781 was converted into 273,034 shares of the Company's common stock. As of September 30, 2019, the amount outstanding under the Third Note was fully converted for a total of 3,106,068 shares of the Company's common stock.
On April 17, 2018, the Board approved a note purchase agreement (the "Fourth Note") allowing the Company to sell an aggregate of $3,000,000 of Notes. The Fourth Note provided that on the closing date of the IPO, the outstanding principal and accrued, but unpaid, interest would be converted into common stock at the conversion price of $1.75. The holders of the Company’s outstanding preferred shares agreed to waive the adjustment to the preferred stock conversion price triggered by the Fourth Note. The Notes bore interest at 10% per annum and matured two years from the Note issuance date but were settled as a result of the Company's IPO on February 19, 2019.
The total amount of issuance under the Fourth Note amounted to $3,000,000. The Company issued $1,272,000 in principal amount of such Notes to related party investors and $1,728,000 to non-related party investors. As a result of the Company’s IPO, the principal amount of $3,000,000 and accrued interest of $221,775 were converted into 1,841,036 shares of the Company’s common stock.
The Company incurred issuance costs relating to the Fourth Note in the amount of $163,760, which were being amortized over 24-months but were accelerated as a result of the Company’s IPO closing, resulting in the remaining $118,492 being expensed during the nine months ended September 30, 2019.
The Company also issued warrants to purchase 91,350 shares of common stock at a price of $1.75 per share to placement agents in connection with the Notes issued under the Fourth Note. For additional information, see Note 6. The value of these warrants were $103,006 which was being amortized over 24-months months but were accelerated as a result of the Company’s IPO closing, resulting in the remaining $74,532 being expensed during the nine months ended September 30, 2019.
On August 7, 2018, the Company's Board authorized it to commence a new offering for up to $485,000 10% non-convertible promissory notes, which were accompanied by a five-year warrant to purchase one share of common stock with an exercise price of $1.75 per share for each dollar in principal amount of notes purchased (collectively, the "Fifth Note") that can be exercised (i) at any time on or after the issuance of the notes and (ii) on or prior to the close of business on the five-year anniversary of the issuance of the notes. Mr. Klemp, Dr. Capelli, Ms. Bisson and other members of management collectively purchased $125,000 of such notes and warrants. The principal and interest on the Fifth Note were due on the earlier of one-year from the date of issuance or upon successful completion of the IPO.
On August 31, 2018, the Company's Board approved a $200,000 increase to the Fifth Note authorized on August 7, 2018. On December 21, 2018, the Company's Board approved an additional $300,000 increase to the Fifth Note authorized on August 7, 2018 up to a maximum of $985,000. From October 2018 to February 2019, the Company issued $125,000 and $860,000 of the Fifth Note to related parties and non-related parties, respectively. On February 15, 2019, the Company paid $985,000 in principal and $20,038 in accrued interest to the note holders to repay the Fifth Note in full.
The Company issued 685,000 warrants in connection with the issuances of the Fifth Note in 2018. These warrants were valued at $775,616. Proceeds of $363,748 (of which $66,423 was for related party and $297,325 was for non-related party) were allocated to issuance cost based on the relative fair value of these warrants. These issuance costs were being amortized over 24-months but were accelerated as a result of the Company’s IPO closing, resulting in the remaining balance of $325,955 being expensed during the nine months ended September 30, 2019.
The Company issued 300,000 warrants in connection with the issuances of the Fifth Note in January and February 2019. These warrants were valued at $285,234. Proceeds of $145,974 (of which all was for non-related party) were allocated to issuance cost based on the relative fair value of these warrants. These issuance costs were being amortized over 24-months but were accelerated as a result of the Company’s IPO closing, resulting in the entire balance of $145,974 being expensed during the nine months ended September 30, 2019.